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	England and Wales High Court (Administrative Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Administrative Court) Decisions >> M & C Energy Group Ltd v St Cuthbert's Mill [2013] EWHC 571 (Admin) (14 March 2013) URL: http://www.bailii.org/ew/cases/EWHC/Admin/2013/571.html Cite as: [2013] EWHC 571 (Admin)

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IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ON APPEAL FROM THE GUILDFORD COUNTY COURT
(HIS HONOUR JUDGE REID QC)

		Royal Courts of Justice Strand, London, WC2A 2LL
		14 March 2013

SIR RAYMOND JACK :

1. This is an appeal against the order of HHJ Reid Q.C. made on 23 October 2012 in the Guildford County Court, whereby he granted summary judgment for the claimant, ordered that there should an enquiry as to the quantum of the claim, ordered that £100,000 should be paid by the defendant on account, and made orders as to costs. He refused permission to appeal. It was granted by Eady J. on 20 November 2012.
2. The business of the claimant, M& C Energy Group Limited, is the giving of advice to companies as to their energy supplies, and it seeks 50% of the energy costs saved as its reward. The defendant, St Cuthbert's Mill Limited, manufactures high quality paper for use by artists and photographers, at Heybridge in Somerset. The business had been a division of Inveresk plc, but that company went into receivership on 8 October 2010. The defendant was incorporated on 22 October 2010 as the vehicle for a management buy-out. It began trading from St Cuthbert's Mill on 2 November 2010.
3. On 23 November 2010 a contract was entered into whereby the defendant appointed the claimant its 'Utility Cost Control Specialists for Energy and Water'. The claim is made in respect of services supplied under that contract. Summary judgment was sought for £286,932. Of that, £171,070 related to invoiced sums, and £108,487 was claimed as damages for repudiation of contract. The balance related to interest and compensation under the Late Payment of Commercial Debts (Interest) Act 1998.
4. CPR 24.2 provides that here the question for the court is whether the defendant has a 'real prospect of successfully defending the claim'. In paragraphs 46 to 49 of his judgment HHJ Reid cited a number of authorities as to how the court should approach that question. No point was taken before me as to their effect. The relevant facts are largely not a matter of dispute, and it is accepted that where there is a dispute and the defendant's evidence is credible the court should proceed on the basis of that evidence for the purpose of the application.
5. In his judgment HHJ Reid set out in paragraphs 5 to 39 a comprehensive rehearsal of the facts including the main terms of the contract. I can gratefully adopt it. He stated:

"5. Gas and electricity had been provided to Inveresk plc by respectively Shell Gas Direct Ltd ("Shell") and E.on. Gas was supplied through two meters which were billed separately. Shell had suffered a considerable financial loss was a result of Inveresk plc going into receivership and was anxious that the defendant should find an alternative gas supplier. Its view of the Defendant was not improved by the fact on 6 October 2010 it had sent a recorded delivery letter to the Defendant to which it had had no response: the Defendant asserts it never received that letter, Mr Sinclair of Shell wrote to Mr Bernander, the managing director of the Defendant, on 5 November 2010 indicating that it would require a security deposit or bank guarantee of £49,500 if it was to supply the Defendant with gas and that the contract rate it would charge would be likely to be "considerably higher than our normal contract rate charges". Mr Sinclair wrote "Shell direct would like to encourage St Cuthbert's Mill Ltd to seek and alternative natural gas supplier on or before 16^th November 2010. if the meters are still 'live' with Shell Gas Direct after that date, any gas consumed will be charged at "Deemed" rates."

6. According to Mr Mason's witness statement, presumably prompted by Shell's attitude on or around 9 November 2010 he approached a company called Utility Exchange ("UE") via the internet and asked it to source energy quotes. On the same day Ms Fay Richards of UE emailed a selection of quotes relating to the supply of gas through the Defendant's second gas meter. She also wrote that she had sent the Defendant's details to "our third party company who deal with the half hourly electricity quotations. They will be in touch shortly". Following a chasing email from Mr Mason on 19 November Ms Richards emailed an additional quote for the Defendant's first gas meter. Each of the quotes was made on a "direct debit" basis, i.e. (according to Mr Mason) without the need for a security deposit. He was later put in touch with the third party to discuss electricity supplies but did not follow it up."

7. The Claimant made contact with the Defendant at some point in November and Mr Mason thought it might be worthwhile to arrange a meeting about the possibility of making savings to its energy bills.

8. It is common ground that a meeting took place on 23 November 2010 between Mr Mason, Mr Henrik Bernander and Mr Anthony Kells of the Claimant. At that meeting Mr Mason signed an agreement on behalf of the Defendant. He also signed a client information sheet on behalf of the Defendant. The contract was signed by Mr Malcolm Hay (the Commercial Manager of the Claimant) on behalf of the Claimant on 30 November 2010.

9. According to Mr Mason's witness statement:

"11. Mr. Kells gave us a draft copy of the Contract labelled the M&C Energy Group Utility Service Agreement" which I read at th e meeting. I found the Contract to be unclear and vague. For example, it did not state clearly how the Claimant would be remunerated, or what type of "savings" that remuneration would relate to or how any "savings" would be calculated. I therefore asked Mr Kelis to explain when and how the Claimant might be entitled to remuneration. He told me that the benchmark of calculating any savings made pursuant to the Contract would be discussed and agreed between the parties at a later date. Mr. Kells also said that provided that the Defendant had a bona fide written quote from an alternative energy supplier then that quote could be used as a benchmark to calculate any savings giving rise to remuneration under the Contract. Mr. Kells most definitely did not inform me that the Claimant might be entitled unilaterally to apply Shell's and E.on's "out of contract rates" as the benchmark for calculating any alleged "savings" obtained by the Claimant.""

6. In view of a submission made for the defendant I should here insert Part 1 of the contract. It provided:

"1. We appoint M&C Energy Group Limited (M&C) as our Utility Control Specialists for Energy and Water.

2. M&C will examine our relevant utility agreements and our corresponding supplies, services and accounts initially for the last 12 months and will survey any of our premises where this is deemed appropriate. From this information M&C will submit to us reports that detail our present costs in specific cases and, where possible, make recommendations that:

(a) show changes we should make, the savings that arise from these changes and the method of calculating each saving. It is accepted that, recommendations may include measures for reducing consumption and operational measures for reducing costs.

(b) List refunds or credits available to us and steps being taken by M&C to recover these.

3. The recommendations referred to in Clause 2(a) above made by M&C will be pursued by implementation by M&C. In the event ot any recommendation being found unacceptable to ourselves we will notify M&C to this effect in writing within one month of receipt of such recommendations stating the reasons for each recommendation being found unacceptable and M&C will then discontinue their efforts to implement such recommendations."

7. HHJ Reid continued:

"10. The material parts of the contract signed by Mr Mason read as follows:

'Part Two

1. Wherever possible before we sign any proposed energy and water services supply agreements over which we have control, we will allow M&C the opportunity to assess the terms involved and make recommendations for savings.

2. The term savings below shall relate to a change in the calculation of future charges or adjustment to charges previously being claimed by the supplier, which will produce a reduction in the costs which would have been incurred without the change recommended. The term refund or credit below shall include (but not be limited to) the complete or partial recouping of a prior payment to a supplier or a claim for a supplier for payment which is reduced or cancelled.

3. To facilitate the continued examination of our energy and water services costs and the calculation of savings, copies of all energy and water services accounts shall be supplied regularly to M&C.

4. The remuneration of M&C under this agreement shall be;

(a) 50% of such refunds or credits that arise from the recommendations,

(b) 50% of 36 months value of such savings as arise from the changes stated in the recommendations in respect of each separate saving.

(c) 50% of savings arising from negotiation of existing energy supply contracts, for the period of the negotiated contract, invoices for participation in such refunds, credits and savings are due for payment by Direct Debit Mandate within 14 days and will be subject to V.A.T, at the current rate.

Part Three

1. M&C under this agreement shall not be entitled to any other remuneration and shall receive no payment in respect of any recommendation which is notified as being unacceptable,

2. It shall be an obligation of M&C to produce detailed comparisons for each saving achieved to justify the Invoices submitted for participation in the savings. Such comparisons shall be based on the energy and water services accounts which shall be supplied by us to M&C. These comparisons shall, wherever possible, be incorporated in the invoices submitted by M&C but otherwise shall be submitted at periodic Intervals not exceeding one year.

3. This agreement may be terminated in writing by either party at any time, subject only to M&C being entitled to complete their participation in savings, refunds or credits in accordance with Part 2 Clause 4 above.'

11. The Claimant proposed an amendment to the contract on 6 December 2010 which was signed by Mr Hay on behalf of the Claimant on 6 December and by Mr Mason on behalf of the Defendant on 16 December 2010.

12. The contract as amended provided that the Claimant's remuneration would be:

'(a) 50% of such refunds that arise from the recommendations;

(b) 50% of such savings as arise from the changes stated in the recommendations in respect of each separate saving for a maximum of 36 months;

(c) 50% of savings arising from negotiation of existing energy supply contracts, for the period of the negotiated contract'

13. The substantive effect of the alteration was to permit the Defendant to pay by BACS rather than direct debit.

14. On 30 November, the same day as the contract was signed on behalf of the Claimant, Mr Elliott, having failed to get through to Mr Mason by telephone, e-mailed Mr Mason to introduce himself and to recommend that as the gas supply contract were "due for renewal on 17 December" a short term fixed contract be put in place. Mr Mason responded positively the same day.

15. There was then, so far as Mr Mason was concerned, a hiatus until Mr Elliott got in touch again by e-mail on 13 December. Mr Elliott had, however, not been entirely idle. It became apparent to him that the initial suggestion of a short fixed-term contract was not available. In discussion with Shell he elicited the suggestion from Mr Sinclair of Shell on 10 December 2010:

'My suggestion would be that a contract is agreed with an alternative supplier and once we know that St Cuthbert's will definitely be leaving us we may (and I must stress this is not a firm proposal) provide a contracted price for the from 2nd November 2010 to when the supply ceases with Shell.

I appreciate that as a new entity they will struggle to obtain credit but hope that a resolution will be found in the near future.'

16. Following this indication Mr Elliott e-mailed Mr Mason on 13 December 2010 requesting a meeting and recommending a 'full comprehensive tender exercise'. He pointed out that the out of contract rates ("deemed rates") being charged by Shell from 2 November 2010 were much more expensive. He suggested 'M&C shall tender the supply as outlined and then collate offers received, to be presented to St Cuthbert's Mill.'

17. There was a meeting between Mr Mason, Mr Kells and Mr Elliott at the Defendant's premises on 15 December. Mr Elliott produced a "visit record" of that meeting. In it he recorded:

"In terms of the contractual position, AM [Mr Mason] was advised that as a new entity, it would be difficult to arrange a contract as the business has no historical accounts and detailed projections would not be sufficient. The incumbent and other suppliers have already asked for levels of security deposit (gas and elec). AM advised that they do have (the money (?) but is reluctant to furnish a supplier with it as they need to buy goods in.

AM advised they are willing to do what they can to facilitate a contract, such as mid month payment and then again at the end of the month. Basically, we need to think outside the box here to maximise this for the customer and M&C's income. With reference to benchmarking, advised AM that it is M&C's aim to reduce current charges to which AM responded something along the lines of 'you will make a killing this time round won't you'."

18. Mr Mason disputes the accuracy of the "visit record" but did not produce any note of the meeting of his own.

19. The following day there was a telephone conversation between Mr Mason and Mr Elliott, followed by an e-mail in which Mr Elliott stated:

'I advised that given the fact that St Cuthbert's Mill Ltd are a new business entity, it will prove to be difficult to ascertain a supply contract as most suppliers require some form of security, However as discussed earlier today, it looks like I have managed to locate an alternative provider, with respect to the gas supply, that does not require this (fingers crossed). I will hopefully be in a position to submit the paperwork tomorrow. It is M&C's recommendation that the gas supplies at St Cuthbert's Mill be placed into contract with on alternative supplier as soon as possible in order to secure the most competitive rates available for a specified period. Any savings achieved will be subject to M&C's participation as per our agreement. M&C will benchmark against your current charges with Shell Gas Direct and the savings calculation will be a comparison of the new implemented rates against those currently applicable.

Once this is placed, M&C recommend that Shell Gas Direct be approached to see if they will do anything between now and the date when the forward contract comes into fruition, currently anticipated as 01/02/2011. Any contract secured during this period should have an element of retrospective charging, prospectively voiding the deemed charges currently applicable by Shell Gas Direct. If a successful backdate is negotiated with Shell Gas Direct, this will be subject to M&C's participation as per our agreement and the calculation shall be made using the nullified charges against the rates that will be applied.'

20. The letter also recorded that as to electricity E.on had asked for a bank guarantee of £51,000 but Mr Elliott had persuaded E.on to look again at this requirement.

21. Mr Elliott then obtained a quotation from Scottish Hydro (part of SSE plc) and following a conversation between Mr Mason and Shaun Stapeley of the Claimant (Mr Elliott being away on holiday) on 21 December 2010 Mr Stapeley sent Mr Mason two offers by e-mail from Scottish Hydro. In his e-mail he wrote "M&C shall share in the saving attained 50:50 as per the terms of our agreement with St Cuthbert's Mill Limited, saving calculate against Shell out of contract charges (Current Charges 5.5p/kWh plus site specific standing charge as baseline- ie saving as detailed in the attached cost and savings spreadsheet." Mr Mason signed and returned the contracts the same day.

22. On 6 January 2011 Mr Elliott wrote to Mr Mason. The letter began:

Following the recent placement of the St Cuthbert's Mill Ltd gas supply contract with Scottish & Southern, I am writing to inform you of the invoicing method to cover M&C Energy Group's share in the savings attained.

M&C Energy Group's half invoice their share of the saving on interims to be carried out on a monthly basis, commencing February 2011. The calculation will be based on 80% of the estimated saving to allow for changes in consumption. M&C Energy Group will reconcile the saving at the end of each contract year against actual consumption figures. The balance remaining will be shared 50% as per our agreement.

There followed a calculation and the letter concluded "I trust the above is acceptable to St Cuthbert's Mill Ltd. If you require anything further please do not hesitate to contact me." Mr Mason says he has no recollection of having received that letter.

23. On 12 January Mr Elliott spoke to Mr Mason by telephone following a chasing e-mail from Mr Mason about electricity contracts. Mr Elliott's note of the conversation contains the following passage:

'AM [Mr Mason] advised he received the contract from Scottish Hydro and that everything was going smoothly on the gas, thanking M&C for their efforts to date. He said business has been a bit difficult at the moment, not financially on their part, but customer have not updated bank details and are therefore paying bills directly to the receivers. Another problem area for them.

He actually sent the e-mail with respect to elec as had not heard anything as to contract placement. Advised AM that we had trouble obtaining half hourly data from E.on, but they are now aware that we need this information as a matter of urgency, so will update AM by the end of the week to advise as to the current state of events.'

24. On 13 January Mr Mason spoke by telephone to Mr Maitland, a colleague of Mr Elliott, and on 14 January Mr Maitland e-mailed Mr Mason:

'Following our telephone conversation today, I can confirm that we are waiting for an offer from Southern, which should be with me next week (subject to credit checks but these should be ok based on the gas outcome). On completion of this negotiation we will ensure your supply transfers over and share in any savings made on the rates 50/50. With this, I am negotiating with E.on a back-date of more market reflective rates, which would generate a saving subject to the usual share of savings once implemented by us or another party.

25. While this negotiation in relation to the electricity price was going on Mr Elliott had been in contact with Shell on the topic of gas prices. On 17 January he e-mailed Mr Mason. The substance of the e-mail read:

'The position of Shell, as previously stated is that they were not prepared to offer a contract to St Cuthbert's Mill, for reasons given in the letter to you dated 05/11/2010. Therefore, St Cuthbert's Mill would be charged on default rates up until M&C arranged for the supply transfer.

However, I have been in discussions with Shell and am pleased to confirm that due to you being an M&C customer, Shell have offered a gesture of goodwill and they are now prepared to offer a lower rate, which will omit the default charges currently being passed through and replaced with something more reflective of the current market. This will generate a saving against the price that you would be paying for the interim period and therefore St Cuthbert's Mill will be better off as a result of our negotiations.

Given Shell have relaxed their position, it is our recommendation that St Cuthbert's Mill accept the prospective offer, as this will secure a much lower rate for the interim period. M&C will participate 50% in any saving resulting from our recommendation as per the terms and conditions of our agreement. The term saving is defined as the monetary difference between the price that St Cuthbert's Mill would have been obliged to pay Shell under the default rates and the price that will be passed through for the interim as a result of this goodwill gesture.'

26. On 19 January he followed his e-mail up with another:

'Further to the below, I have received an update from Shell as to what they are prepared to do for St Cuthbert's Mill as a result of being an M&C customer,

Shell have advised me that they are prepared to offer a lower rate for the Period November 2010 -January 2011, omitting the default charges and pricing based on a more reflective rate.

Against the default rates that would be passed through but for M&C's involvement, the potential estimated saving that can be made here equates to £68,000 for the interim period. Given the value of this saving resulting from Shell's goodwill, M&C would recommend that this be accepted in order to obtain this benefit. This estimated value is of course subject to what the month of January 2010 actually uses, so would need to be reconciled by Shell to ascertain the exact values, but this will be determined once this is carried out by Shell; it is likely to be within the region of the stated figure.

You could indeed not accept this recommendation, but the charge would be £68,000 greater as a direct result. M&C's primary objective is save you money where possible and this demonstrates a real cost reduction in charges that would occur otherwise. Therefore, it is definitely in your interest to have this implemented.

Can you please confirm via response the above recommendation as acceptable and that you would like for me to proceed?

I look forward to hearing from you.'

27. Mr Mason delayed in replying to this because, it appears, he had to consult his fellow directors and there were problems in doing so.

28. Also on 19 January Mr Maitland followed this up with an e-mail attaching "a refreshed offer from Southern for 12 or 24 months". He asked that Mr Mason "sign your desired contract length, complete the Direct Debit form and email it back to me ASAP." Mr Mason responded that afternoon "Please find a signed 24 month contract attached and DD. If you could lock in and confirm that would be appreciated." The same afternoon Mr Maitland sent a further "3 month backdate contract" to enable the lower rates payable under the new contract to be applied for the previous three months. Mr Mason signed and returned the form on 21 January 2011, this time describing himself as "Company Secretary".

29. On 21 January Mr Maitland sent Mr Mason a letter setting out the Claimant's calculation of "the annual saving versus the agreed benchmark". The letter concluded "I trust the above is acceptable to St Cuthbert's Mill Ltd, however if you require anything further please do not hesitate to contact me." Mr Mason says he has no recollection of having received this letter.

30. On 25 January 2011 Ms Harrison of the Claimant sent copies of the Scottish Hydro-Electric contract for the period 1 February 2011 to 31 January 2013 to Mr Mason for signature and return. Mr Mason's response was to e-mail Mr Maitland: "I have had the contract through but it is for 24 months and we had agreed 12 months. Can you send a revised copy please?" This was, of course, simply untrue, but Mr Maitland nonetheless made an unsuccessful attempt to get the supplier to reduce the contract to 12 months.

31. On 11 February there was a meeting between Mr Mason on behalf of the Defendant and Mr Elliott and Mr Maitland on behalf of the Claimant. Mr Mason was presented with a copy of a report. The material parts of the Claimant's visit record of this meeting are as follows:

'He thanked M&C for arranging contracts without the requirement of a bankers guarantee (further below). Getting a bankers guarantee was not possible for the customer as the bank had viewed them as a 'Phoenix Company' and thus a risk!

He then went on to joke that had he spoken lo the Investors in the first instance a bank guarantee could have been obtained through them, so security deposit would not have been required…

Gas:-…

Discussed the situation with the refund and advised AM that this was with him, as the calculation had been done; It was a question of paying the money to Shell to finalise the deal. AM had said the investors had requested the value be paid to Shell to do the deal, so in the process of paying it. Will keep in contact with customer and Shell to ensure this goes through.

Electricity:-

AM conceded that he had made an error in signing the 24 month contract as with all the changes he had lost track of what he was doing, However, M&C justified the error by saying that the difference between the 12 and 24 month offers was not too great and it gives St Cuthbert's Mill a chance to build up a bit of credit history. AM did agree with this line of thought and maybe it wasn't a bad 'mistake' after all.

Mentioned the situation with the price backdate with E.on and all of this has been approved internally so client should receive the benefit of this one soon

With respect to DD, AM advised that it is not something he wants to do now, but possibly in the future. AM needs to manage his costs so wants to keep on top of them by controlling payments.

Meeting was good and client always seemed very positive. Client was asked if he had any problems with the service and he complimented M&C on the job we have done so far.'

32. Mr Mason did not accept this as an accurate record of the meeting.

33. On 15 February following the meeting Mr Mason e-mailed Mr Elliott pointing out that throughout they had not spoken about the benchmark for savings. He continued:

'When Anthony [Kells] came to see us initially, he stated that the base prices need to be agreed to calculate the savings and can be against alternative quotations that we have obtained,

With regard to the gas contract, we have a significantly lower figure than the 5,5p from Shell, but did not progress due to the meeting with Anthony. Surely, this would be the base price to be used for savings.

The electricity savings are, again, calculated against non-contract rates from E.On whereas they were prepared to supply on contract and I believe that this should be the base for the savings calculation.'

34. Mr Elliott replied:

In regards to calculating savings, M&C always state clearly in an e-mail before a contract is signed, the rates that will be used to calculate the saving that is achievable, detailing the prospective cost saving in our e-mails that have been submitted to you. We then follow this up with a formal letter owning outlining the saving and how we propose to bill it, which was also carried out. The letter pertaining to gas was submitted on 06/01/2011 and the electricity on 21/01/2011.

Your incumbent suppliers were not in a position to offer St Cuthbert's Mill a contract without some form of security deposit being paid up-front, due to credit issues….

We had not been given firm contracted offer from yourselves to use as a baseline and therefore our proposal was to use the default rates. Savings were detailed within our recommendation and this was subsequently accepted as detailed in our correspondence (21/12/2010 for gas - 14/01/2011 on elec).

In light of this a true saving was achieved and the objective set was completed as St Cuthbert's Mill would have still been on default rates until the security amounts were paid up-front to the suppliers.'

35. The evidence does not disclose any response to that e-mail.

36. Thereafter there still remained the problem that the Defendant had not paid the reduced amount that Shell was prepared to accept and Shell was on the point of withdrawing the concession which it had made. However, as a result of the good offices of the Claimant, a final extension for payment was secured for payment by noon on Tuesday 15 March 2012, with which the Defendant complied.

37. The Claimant then proceeded to invoice the Defendant on a monthly basis for the 50% of the savings it claimed to have achieved. The Defendant, albeit belatedly, paid four invoices, I259972, I260034, I260905 and I260684, Mr Mason sending an e-mail on 29 March 2011 apologising for the "oversight".

38. When payment ceased the Claimant initially threatened winding up proceedings but desisted following the Defendant's contention that the debt was disputed. These proceedings were issued in about November 2011 and a Defence and Counterclaim served on or about 18 January 2012.

39. During the pre-litigation correspondence the Defendant confirmed that it did not accept the contract and that payments would not be made. The Claimant accepted this repudiation of the contract by the issue of proceedings."

8. The claimant's case is in essence that, first, the contract provided for the remuneration and, second, that the basis of calculation in relation to the specific supply contracts arranged by the claimant was agreed by the defendant by the entering into of the supply contract in question.
9. I will first consider the terms of the contract. It was submitted by Mr Ben Valentin for the defendant that they did not cover the situations which had arisen. It was submitted that Part 1 did not apply to a situation where the claimant found a new supplier, or obtained better terms from an existing supplier, because it related to physical improvements designed to cut energy costs. However the reference to refunds and credits is inconsistent with that. That must refer to an existing supplier with whom a successful negotiation is concluded.
10. Paragraph 1 of Part 2 provides for the claimant to assess the terms of any agreements which the defendant is considering signing and to make recommendations for savings. Paragraph 2 then defines savings as follows:

"The term savings shall relate to a change in the calculation of future charges or adjustments to charges being claimed by the supplier, which will produce a reduction in costs which would have been incurred without the change recommended."

This Part is therefore directed at utility agreements which the defendant is considering and gives the claimant an opportunity to make a recommendation for saving. The saving is the reduction in cost produced as a result of the recommendation, that is to say, the difference between the cost as per the agreement with the supplier that the defendant was considering and the cost as per the agreement with that supplier, or possibly another supplier, following the claimant's recommendation. The wording is not as clear as it might be, but that seems to be its effect.

11. The amended clause 4 of Part 2 covers remuneration. The amendment had two purposes. One was to set a limit of 36 on the number of months over which a saving might be claimed. The second was to enable payment by BACS rather than direct debit. The clause gave the claimant (a) 50% of such refunds as arose from its recommendations; (b) 50% of such savings as arose from its recommendations up to 36 months; (c) 50% of savings arising from negotiation of existing contracts (i.e. renegotiation).
12. The main function of the claimant was to find cheaper suppliers of gas and electricity, who did not require a deposit or bank guarantee. The wording of Part 2 does not precisely fit that situation, but it can be fitted to it without real difficulty. It is plain that this is what should be done.
13. Mr Andrew Butler submitted for the claimant that the effect of paragraph 2 was that, in relation to gas, the saving was to be assessed on the basis of the defendant's 'deemed contract rate' with Shell, and, in respect of electricity on the rate being charged by E.on. Mr Ben Valentin submitted for the defendant that the saving was to be assessed on the basis of the rate which the defendant might have obtained in the market without the claimant's intervention, for example, the rates quoted through Utility Exchange for gas, which were better than the high 'deemed contract rate' to be applied by Shell. I think that there is room for argument here. For if the defendant was always going to do better than, for example, Shell's deemed contract rate, it can be argued with a real prospect of success that the genuine saving cannot be calculated by it. As an illustration, suppose Mr Mason had said to Mr Elliott, 'This is what we've got from Utility Exchange: can you better it?'
14. If that were all of the claimant's case, it would leave them entitled beyond doubt to some remuneration but would leave what that remuneration was to be determined. However, at the centre of the claimant's case as it was advanced to me was the submission that by Mr Mason's subsequent conduct he agreed to the bases of remuneration now claimed.
15. I will take first the events relating to the new contract for the supply of gas by Scottish Hydro. In his email of 16 December 2010 Mr Elliott stated that the claimant would use Shell's current rates, i.e. the deemed contract rates, to calculate the saving. On 17 December 2010 Mr Elliott recommended Scottish Hydro's offer. That was then considered, and discussed by telephone and Mr Mason said he wanted to go ahead. This was the same day that Mr Mason signed the amended paragraph 4 of Part 2 of the contract (it had been signed by the claimant on 6 December). On 21 December he was emailed the contract for him to sign. The email stated that the claimant would be remunerated on the basis of the Shell 'deemed contract' rates. Mr Mason signed the contract and returned it to the claimant. If he had questioned the basis of the remuneration he might have been told he must accept it or lose the new supply contract – something which the defendant badly needed, or a negotiation might have occurred. But he did not.
16. It is the claimant's case that by sending back the contract Mr Mason clearly and unequivocally accepted that the savings should be calculated as set out. This is to be looked at objectively. In my judgment, the email of 21 December is to be read for this purpose as if it said: 'Here is the contract we have procured for you. If you want to go ahead with it, this will be the basis on which we will charge.' Mr Mason accepted that. I do not think that it can be realistically contended otherwise. His subsequent conduct is really only consistent with his having intended to do so. It was not until 15 February 2011 that he raised any question about the basis of the claimant's remuneration.
17. The Scottish Hydro gas contract began on 1 February 2011. In the meantime the defendant's supplier continued to be Shell. The claimant negotiated with Shell to get a better deal for the defendant for the period from the defendant's commencement in business to 1 February. In his email of 16 December Mr Elliott had suggested negotiating a 'back-date' with Shell, saying that the calculation of savings would be done using the new and old, open contract, rates. On 17 January Mr Elliot emailed Mr Mason saying that because the defendant was a customer of the claimant Shell was prepared to offer a lower rate. He stated that the claimant would receive 50% of the difference between Shell's open contract rates and the new rates. On 19 January Mr Elliott emailed that the saving would be £68,000 and asked whether he should proceed. On 25 January Mr Mason said that his fellow directors were considering the position. On 26 January Mr Mason asked how the £68,000 was calculated. Mr Elliott responded the same day. The defendant accepted the lower rate offered by Shell but delayed in paying what was due until 11 March, which was only possible because the claimant had negotiated with Shell an extension of the time for payment.
18. The position is here little different to that arising in connection with the Scottish Hydro gas contract. Mr Mason had been told how the claimant's remuneration would be assessed if the defendant went ahead with the deal on offer. The defendant went ahead and thereby accepted liability to remunerate the claimant on that basis. The position is here clearer in one respect. For if the claimant had not negotiated the reduction with Shell, the defendant would have remained liable to pay Shell at the high open contract rates. So there is here no alternative to the saving being the difference between the two: there is no possibility of a third party supplier at a better 'market rate' in this period.
19. I turn to the position as to electricity. On 14 January 2011 following a telephone conversation Mr Maitland of the claimant emailed Mr Mason that he was waiting for an offer from Scottish Hydro, and savings would be shared 50/50. He said also that he was negotiating a back-date at better rates with the current supplier, E.on, again with a 50/50 sharing. Contracts with Scottish Hydro for 12 months and 24 months were sent to Mr Mason on 19 January, saying he should sign whichever the defendant preferred. Mr Mason returned the 24 month contract that day.
20. Mr Maitland's email of 14 January did not spell out that the base line for the remuneration calculation would be the existing rate with E.on. But it was implicit that it would be both from the situation itself and from what had been agreed in respect of the switch from Shell to Scottish Hydro for gas. By returning one of the contracts Mr Mason accepted that the claimant should be remunerated on that basis.
21. On 21 January 2010 Mr Mason accepted the reduced rate negotiated by the claimant for supply of electricity by E.on up to the date when the supply by Scottish Hydro began. This followed what has been spelt out in relation to the gas contracts, and there was no alternative to using the difference between the two E.on rates.
22. I will now consider the defendant's case in misrepresentation - as it has been primarily put, or in estoppel as it was also put. This relies on Mr Mason's account of the meeting on 23 November 2010, which has been set out. In short Mr Mason says that he was told that remuneration would be agreed at a later date, and that it would be based on the best available price available to the defendant in the market. It was submitted said that this was a misrepresentation which entitled the defendant to rescind the contract or to damages. It may also be put as an estoppel which bars the claimant from putting forward the construction of the contract on which they rely. That may be the easier way to put it in my view. But I do not see how the misrepresentation or estoppel can survive the defendant's subsequent acceptance of the basis of remuneration in respect of each of the two contracts and one reduction negotiated by the claimant. If Mr Mason had been misled, the time to say so was when he was told by the claimant how it intended to charge in respect of the Hydro Scottish gas contract. But he kept silent and by returning the signed contract he accepted the basis of charging. He thereby waived such rights as he had.
23. However if one considers the claimant's case on the basis of offers by the claimant to obtain contracts as submitted in return for remuneration as stated, which offers were accepted by the returning of signed contracts, what was said at the meeting on 23 November 2010 is irrelevant.
24. One may have some sympathy with the defendant in that, if it had conducted things differently it might well have secured a better deal, and it may well be that the claimant has driven a hard bargain with a company which was in a difficult position as regards its energy supplies. But sympathy does not found a defence.
25. I conclude therefore that HHJ Reid Q.C. was right to find that the defendant had no defence which had a real prospect of success. He did not attempt to assess the precise sum which was due but ordered an enquiry and that £100,000 should be paid on account. There was no appeal against that by itself.
26. The appeal must be dismissed. I hope that counsel may agree the orders to be made in consequence. But if they cannot and if it is requested, I will deal with it by way of written submissions.